Virtu’s Optionality? Some Good News…
“That which does not kill us makes us stronger.” - Friedrich Nietzsche “We adore chaos because we love to produce order.” ― M.C. Escher One intangible cost of being the sole US publicly-traded market making firm is the required level of financial and operational transparency - and the investor relations burden - that comes with that status. In this case, that cost may be unusually high because of the relative opacity of the competitors in this sector [...]
Gearing up for Jane Street
“Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference.” - Robert Frost Jane Street is one of the most exciting players among the roster of proprietary market making firms in the entire trading ecosystem. What began in 2000 as Henry Capital, with memberships on the American Stock Exchange and Midwest Stock Exchange, today sports a broad global footprint and continues to solidify its legendary status [...]
Renaissance Technologies: Discovering the Omnitrade
"There's a point, seven thousand RPM, where everything fades. The machine becomes weightless, just disappears. And all that's left is a body moving through space and time. Seven thousand RPM." - Carroll Shelby In the early days of Quantlab, we suspected that there were stock trading signals in option data. Our futures program had waaaay too much slippage in it, and we needed to make a shift into a strategy with far less position concentration if we were ever [...]
Morgan Stanley: Taking the Trade Out of E*Trade?
"What you do speaks so loudly that I cannot hear what you say." - Ralph Waldo Emerson On Thursday, February 20, Morgan Stanley (MS) announced its acquisition of E*Trade (ETFC) for $13 billion in a brillaint move that simultaneously 1) responds to the recent move to $zero commissions in retail brokerage; 2) responds to Charles Schwab's recent announcement to acquire primary ETFC competitor TD Ameritrade; 3) boosts MS's position in coveted wealth management channels; 4a) takes greater [...]
A Flock of Canaries: From Allston to XTX
"You don’t lead by pointing and telling people some place to go. You lead by going to that place and making a case." - Ken Kesey If you believe - as we do - that everything is connected to everything else, then it stands to reason that all events have potential to be seen as the proverbial canary in the coal mine. Therefore, what we really need to do is notice stuff and connect dots. Here's a [...]
Virtu Financial: Musical Chairs
"No good opera plot can be sensible, for people do not sing when they are feeling sensible." - Frank Zappa On Tuesday, February 11, Virtu reported Q4 and full-year 2019 financials. What follows are a few thoughts and charts on the latest data: Net trading income came in at $228.7 million for Q4 - not great, not terrible - based on a QoQ uptick in core equities; some weakness in global FICC, options and other (whatever that [...]
AQR Capital Management: The Ominous Shapes of Strategy
"The cave you fear to enter holds the treasure you seek." - Joseph Campbell For 12 straight years beginning Q4 2001, AQR Capital Management, LLC (AQR) - one of the great and legendary quant hedge funds of the current era - grew equity positions until peaking at 2,346 (long equity) positions by Q4 2013. Since that time, AQR's long US equity book has found an ominously consistent plateau averaging 2,140 positions. Here, in what would normally seem [...]
AQR: The Shape of Strategy (Teaser)
For 12 straight years beginning Q4 2001, AQR Capital Management, LLC (AQR) - one of the great and legendary hedge funds of the current era - grew equity positions until peaking at 2,346 (long equity) positions by Q4 2013. Since that time, AQR's long US equity book has found an ominously consistent plateau of about 2,050 positions. And, in what would normally seem to be a benign factoid, lie the seeds of the story for why AQR has [...]
Barclays Succumbs, Flips Options to GTS
"Sometimes it is the people no one imagines anything of who do the things that no one can imagine." - Alan Turing One by one, those willing to stand and make markets in options are - uh - taking a knee. Back in December (2019), Barclays became the latest in a long string of players - big and nots-so-big - to punt their options trading business to a willing buyer before any more value evaporated. So, we thought [...]
Tom Brady, Louis Bacon and the Game Changers
“From the point of ignition to the final drive, the point of the journey is not to arrive.” - Neil Peart New clues are emerging on the nature and pace of change... Here's the setup: Unlikely and unexpected virtuosity often serves as the catalyst for a dynastic run of success. Moreover, legend has it, that it's usually the will over and above the skill that fuels the initiation and duration of that run. While skills eventually decay, [...]
